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Samsung seeks broader chip base

(Baystreet Tech Insider (Canada) Via Acquire Media NewsEdge) Samsung Electronics Co is looking to supply chips to more Chinese and other emerging smartphone makers, the head of its system chip business said, to counter any falloff in demand from Apple Inc, which is weaning itself off Samsung chips used in its iPhones and iPads.

Samsung and its main U.S. rival, and biggest customer, together account for more than half the global smartphone market, and the South Korean group is the main supplier of mobile processors, or application processors (AP), powering both Apple devices and its own range of Galaxy phones and tablets.

But, as Apple looks to be less reliant on its rival for parts for its gadgets - it is already buying fewer Samsung memory chips and display screens as the two have gone to war over patents - concerns have grown that Samsung may see its processor revenues tumble.

Supplying processors for Apple products has been the mainstay of Samsung's system chips business.

Goldman Sachs estimates Samsung's AP chip sales to Apple will rise to 9.3 trillion won ($8.8 billion U.S.) this year, or nearly 80% of Apple's spending on Samsung processing chips, memory chips and flat screens. But that could tumble to just 2.5 trillion won next year, as Apple will shift 30% of its AP business from Samsung and eventually 80% by 2017, according to Goldman.

China's Meizu, one of the local smartphone newcomers, uses Samsung's Exynos quad-core chip for its MX smartphone, and Lenovo's K860 LePhone is also powered by Exynos.

Still, Samsung's mobile processor business is almost entirely tied to the fortunes of Apple and its own mobile business - the Galaxy range. By comparison, chip rivals such as Qualcomm Inc, Texas Instruments and Nvidia have a broader client base - from LG Electronics Inc and Nokia to HTC Corp, Huawei Technologies Co and Google's Motorola.

The mobile processor market, driven by roaring sales of smartphones and tablets, is a bright spot for a semiconductor industry that is struggling with falling computer sales. Research firm Gartner estimates the mobile processor market will grow 30% this year to $13.5 billion U.S. and hit $16.5 billion U.S. next year.

To strengthen its chip capability, Samsung bought U.K. chipmaker CSR Plc's mobile phone connectivity and location technology for $310 million U.S. last year, and it is now looking at how it can improve modem chip technology, especially the baseband chip solution that enables wireless devices' radio communications.